Business Case Studies & Business Publications

Credit and Collections Corporation

Sack, Robert J.

Case

Credit and Collections Corporation

Sack, Robert J.

C-2253 | Published April 4, 1997 | 6 pages Case

Collection: Darden School of Business

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An accounting issue arose when a firm that managed accounts receivable for clients began planning for a public issue of its shares. Two public accounting firms it approached gave different opinions on when revenue could be recorded. The arguments included: earned and realized; the Financial Accounting Standard Board's statements of Financial Accounting Concepts: Con 5 and Con 6; discussions about whether the service being sold was the process or whether it was the collections themselves. Comparable accounting practices in other industries (franchising, real estate, software, oil and gas carve out, health clubs and life insurance) seemed to follow conflicting policies.